Demand for rack systems and growth of hyperscale data centers help drive growth of x86-based systems, according to IDC and Gartner analysts

Worldwide server revenue and shipments saw strong growth in the third quarter, driven by continued expansion of hyperscale environments running x86-based processors primarily from Intel and data center demand for rack-scale architectures, according to analysts with Gartner and IDC.

In numbers released Dec. 2, IDC analysts said that revenue in the quarter jumped 5.1 percent over the same period last year, to $13.4 billion. Gartner analysts said that revenue rose 7.5 percent year over year to $13.5 billion, with shipments increasing 9.2 percent, to 2.76 million units.

Hewlett Packard Enterprise (HPE) and Dell kept the top two spots in the lists for both analyst firms, with IBM, Lenovo and Cisco Systems filling out the top five. Of those, only IBM saw a decline in revenues, driven in large part by the sale of its x86 server business last year to Lenovo for $2.1 billion. In turn, Lenovo saw revenues increase significantly year over year, between 536.1 percent (IDC) and 545.2 percent (Gartner).

Revenue

Gartner analysts noted that while overall server revenue for IBM fell 42.8 percent over the third quarter last year, revenue for its Power-based RISC systems dropped only 3.1 percent, while its System z mainframe revenue grew 15 percent. In all, calculating only the server businesses that it kept, IBM revenue increased 5.1 percent, they said.

“As the server market nears the end of 2015 with continued growth, fears of depleted IT budgets from an early run on servers have failed to materialize,” Kuba Stolarski, research director for servers and emerging technologies at IDC, said in a statement. “At the same time, that perfect storm in the first quarter could not have been expected to continue through the end of the year, as the effects of the cyclical enterprise refresh, Windows Server 2003 end of support, and [Intel Xeon] Grantley platform refreshes all come to an end.”

Stolarski said that IDC sees some opportunities for short-term growth, due to Microsoft ending support for SQL Server 2005 in April 2016, which should help drive some businesses to refresh their systems. IDC estimated that about 800,000 servers worldwide are still running SQL Server 2005. However, longer term, growth in the server market will be driven by such emerging trends as software-defined, disaggregated servers and systems for the Internet of things (IoT) deployed at the edge of networks.

The trends in the quarter continued to be growing demand for x86-based systems—Intel holds more than 98 percent of the market, with Advanced Micro Devices grabbing the rest—smaller revenue increases for mainframes and revenue declines for RISC- and Itanium-based Unix servers of more than 5 percent, the analysts found.

Volume system revenue grew the most at 7 percent, according to IDC, due in large part to demand from hyperscale data centers and refresh of x86-based platforms by enterprises and small and midsize businesses (SMBs). High-end system revenue jumped 1.2 percent, helped by IBM’s z13 mainframe refresh, IDC analysts said. Revenue for midrange systems dropped 5.8 percent as the refresh of x86 systems wound down, they said.

Rack-based systems showed particular strength in the quarter, according to Jorge Vela, research analyst for servers and virtualization at IDC.

“Data centers continue to standardize on a rack-based architecture,” Vela said in a statement. “The overall market benefited from this trend, with rack-optimized servers growing much faster than the market at 9.7 percent. Overall, racks contributed 125 percent and 112 percent to unit and revenue growth, respectively; without this growth, the market would have been in the red.”

Vendors shipped more than 130,000 extra rack-based systems compared with third quarter in 2014, which added another $727 million to the overall market, he said. More than half of the growth came from Dell and HPE (which was Hewlett-Packard until the company official split in two Nov. 1), and the success of the form factor enabled both to not only hold onto the top two spots, but also increase their market shares.

“At the same time, Cisco and ODM [original design manufacturers] continue to challenge the two market leaders, gaining market share at the expense of smaller competitors,” Vela said.